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Learn about how Fixed Index Annuities are a safe money alternative

A Safe Money Alternative

A Fixed Index Annuity (FIA) is a fixed annuity with an interest rate that is linked to the performance of a stock index (S&P500 or NASDAQ for example). The annual credited interest rate can increase depending on the market index but can never be less than zero should the market decline. A fixed index annuity offers safety of principal, a guaranteed minimum return, and the ability to participate in market gains through an index-linked interest rate. A fixed index annuity has many features such as participation rates, interest rate caps, and potential administration fees. There are also many methods used to calculate and credit interest such as the point-to- point, high-watermark, averaging, and annual reset indexing methods. Features and indexing methods directly affect a fixed index annuity's potential return.

Safe Money First A fixed index annuity can be described as a hybrid of fixed annuities and variable annuities, having some characteristics of both, and falling in between regarding the potential for return and levels of risk. With traditional fixed annuities, the annuity issuer guarantees the rate of return. Investors in fixed annuities elect safety of principal and guaranteed returns over market risks and the potential for higher returns. With a variable annuity, the rate of return varies according to the performance of the investments you choose from those offered by the issuer. With the exception of a guaranteed sub account, variable annuities do not offer any guarantees on the performance of the sub-accounts. You assume all the risk related to those investments including the risk of losing principal. In return for assuming this greater amount of risk, investors in variable annuities have a greater potential for growth in earnings. A fixed index annuity takes the middle ground, offering limited downside risk balanced by limited upside potential for returns. They offer safety of principal and, generally, a minimum rate of return if the fixed index annuity is held for the full term.